Mini Money Managers

by Shaunna Privratsky

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"I got $35 for my birthday. I'm going to put $20 in the bank and save the rest for something I really want." ~ Alex, age 7

"Cool!" ~ Brandon, age 5

I couldn't help smiling to myself when I overheard this conversation between Alex, my son, and his friend. I have always tried to instill a thrifty nature in my children and it sounds like Alex is well on his way to being a wise saver.

Here are some tips to make your child into a mini money manager. Start them out young. Even small children can understand budgets on a rudimentary basis. At the grocery store, I frequently made it into a game. "Okay, we have $30 to spend. The bill was $22, so how much do you each get to spend?" I'd show them eight one-dollar bills and they could easily grasp that they each got four.

Put it into terms children can understand and they will get an early awareness of the buy/sell monetary system. "This toy costs $4.50 and you have a five-dollar bill. Do you have enough?" This helped build math skills at the same time.

Our children learned the value of a dollar early. We are fortunate to have several thrift stores and two dollar stores, where everything costs $1, in our area. They have learned that sometimes you get what you pay for, which is a hard lesson for even adults to learn. Erica and Alex picked it up fairly painlessly after a few cheap toys broke the first day. Although they did receive a refund, they learned to shop for quality as well as price.

Teach lifelong saving strategies to your children. Whenever my kids receive birthday cash or other monetary gifts, we make a point to save at least half, more if they are willing. We put it into their individual savings accounts. At any bank or credit union, children's savings accounts are usually free to open with no minimum balance.

When the savings balance reaches $25 or more, we purchase a US Series E savings bond in the child's name. The purchase price is half of what the bond matures at, so $25 nets a $50 payoff in approximately twelve years. By the time Erica and Alex are teenagers and really need money for college or a car, the money will be waiting for them.

Help your child "budget" their money for gifts or things they want to buy. This year for the holidays, I gave each of our children $25 to buy gifts for the family. I offered my help, but both kids decided to handle it their way. Ten-year-old Erica made a huge list, perhaps not realizing she'd have to locate gifts for under $1 to complete it.

She managed remarkably well, better than I anticipated. After a couple of trips to our favorite dollar store, she pared down her list a bit and scored some wonderful and thoughtful gifts. For example, she needed a "Secret Santa" gift for a fellow Junior Girl Scout. She knew from school that the girl collects bandanas, so she bought a green one and two boxes of Junior Mints for only $3. We found a small basket at home and Erica arranged the bandana and mints inside, then decorated it with pretty red and green ribbons.

Alex did well, too, although he kept asking "So, do we get to keep whatever money is left over?" He's my little money mogul. We also did a lot of comparison shopping. Alex discovered on his own that the Dollar Store has the exact same toy rifle for $1 that Wal-Mart sells for $4.99. He was so proud of his bargain that he told his two friends to go the Dollar Store to buy them.

Allowances are another way to teach children how to handle money wisely. Each family must decide the terms that work best for them. At our house, if Erica and Alex keep their rooms clean for a whole week, they each earn $1. Then if there are any special chores or tasks that they help with, they earn additional money.

This works well for motivation and in teaching the basics of work ethics. You have to take each child's personalities into consideration, though. Erica doesn't always mind a messy room and frequently misses out on her $1 a week. Yet if she wants a special treat like a weekend sleepover, she knows she has to have a clean room. So that ends up being the incentive for her.

It is neat to see how children handle money matters. In today's cost-conscious world, we have to teach them how to be smart shoppers and wise savers. Today's mini money managers will be tomorrow's savvy investors and dollar stretchers.

Shaunna Privratsky became an expert in personal finance out of necessity. Between writing, reading and gardening, she is always on the lookout for bargains. Please sign up for the free newsletters at The Discount Diva. You can also visit Shaunna on Google+.

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